“Objective Falsity” Is Not Required Under the False Claims Act: A Legally False Opinion May Suffice
In a significant win for whistleblowers, a federal appellate court held this week that, in order to determine liability under the False Claims Act, a whistleblower need not prove that a claim is “objectively” false. Instead, the Court held that, consistent with common law, a claim can be false under the FCA if based not on objectively verifiable facts, but on non-compliance with statutory or regulatory requirements (i.e., “legally false”). Therefore, as often arises in medical necessity cases, a whistleblower can prevail on an FCA claim targeting a physician’s medical judgment if the whistleblower can marshal the testimony of another medical expert that the defendant physician’s judgment did not meet certain legal requirements. If upheld, the Court’s decision should breathe new life into medical necessity and other types of FCA cases that involve false statements of opinion.
In the case before the Court, three whistleblowers alleged that Care Alternatives, a hospice provider in New Jersey, admitted patients who were ineligible for hospice care and directed its employees to improperly alter those patients’ Medicare certifications to reflect eligibility. If true, this is a significant violation because a patient placed on hospice waives the right for Medicare payment for “curative” care, and so may forgo treatments necessary to extend their life. The whistleblowers’ medical expert reviewed the medical records for a sample of 47 patients and found that patients were inappropriately certified for hospice care 35% of the time. Defendant Care Alternative’s expert reviewed the same records and testified that a reasonable physician would have found all the sample patients to be hospice-eligible. Because the whistleblowers had only shown a difference of medical opinion, the district court granted summary judgment for Care Alternative for failure to show “objective falsehood” and dismissed the case.
But the U.S. Court of Appeals for the Third Circuit held that this was an error. In regard to whether a hospice-care provider’s claim for reimbursement can be considered “false” under the FCA on the basis of medical-expert testimony that opines that accompanying patient certifications did not support patients’ prognoses of terminal illness, the Court said the answer was a “straightforward yes.” The Court also rejected the lower court’s “objective” falsity standard, finding it unsupported by the text of the False Claims Act, at odds with the interpretation of the FCA falsity requirement by the U.S. Supreme Court, and inconsistent with its own case precedent that “interpreted falsity to encompass a theory of liability based on non-compliance with regulatory instructions and not just objectively verifiable truths.”
The Court of Appeals further held that the testimony of the whistleblower’s expert was evidence that Care Alternatives had not complied with a specific regulatory requirement, specifically, each hospice patient must be certified as terminally ill by a physician, and this prognosis must be supported by clinical information and other documentation. See 42 C.F.R. § 418.22(b)(2). The Court found that the testimony of the whistleblower’s medical expert created a material dispute as to whether the “terminally ill” prognosis of all the patients in the sample was, in fact, supported by the medical record. And this difference of medical opinion was “enough evidence to create a triable dispute of fact regarding FCA falsity.” The Court therefore reversed the lower court’s grant of summary judgment in favor of Care Alternatives and remanded the case for consideration of the other elements of FCA liability, which include knowledge and materiality. The whistleblowers may not yet prevail, but at least they have survived on the FCA element of falsity and created favorable case precedent for other whistleblowers in the process.
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